7.2 Part D Exclusions and Part E: Duties After an Accident

Part D Exclusions

Even with both Collision and OTC purchased, the PAP excludes a defined list of physical-damage losses. The exam expects you to recognize each:

• Public or livery conveyance - using the auto to carry persons or property for a fee (taxi, ride-share without proper coverage).

Share-the-expense car pools are not excluded.

• Wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires - unless the damage results from a covered theft.
• Loss due to war, nuclear hazard, or radioactive contamination.
• Destruction or confiscation by government or civil authority.
• Electronic equipment and media (tapes, records, discs, custom electronics) beyond the small sublimit, unless permanently installed or scheduled.
• Awnings, cabanas, or equipment designed for camper/trailer use not shown in the Declarations.
• A non-owned auto used without a reasonable belief of entitlement.

Trap: Mechanical breakdown is excluded, but if a thief steals the car and the engine is damaged, the resulting damage is covered because it flows from a covered theft.

The public or livery exclusion is increasingly tested because of ride-share. A personal auto used to carry passengers for a fee (a true taxi or unendorsed ride-hail driving) is excluded, yet an ordinary share-the-expense car pool remains covered. Ride-share companies and insurers now offer transportation network driver endorsements to bridge the gap between the personal policy and the company's commercial coverage during the app-on period.

Diminishing the Loss - Deductibles and Betterment

The PAP applies the deductible per occurrence, separately for Collision and OTC. If a single accident triggers both - e.g., the car hits another vehicle (Collision) and the impact ignites a fire (OTC could apply) - typically the higher single deductible applies under the loss conditions, not two deductibles, when one event causes both.

Betterment Example

An older auto needs a new transmission after a covered theft attempt. The new part adds value the worn part did not have. The insurer may apply a betterment deduction so the insured is not enriched. Suppose the repair is $3,000, the deductible is $500, and the adjuster assesses $400 of betterment (the upgrade):

• Payment = $3,000 - $500 deductible - $400 betterment = $2,100.

This reflects the indemnity principle: restore the insured to the pre-loss position, not better.

Betterment is most common on older vehicles where a worn component (tires, exhaust, battery, transmission) is replaced with new. The adjuster prorates the upgrade by remaining useful life. The exam may show betterment alongside the deductible - always subtract both from the gross repair to reach the net payment.

Part E - Duties After an Accident or Loss

Part E lists the insured's duties - conditions precedent to coverage. Failure to comply can let the insurer deny or reduce a claim if the breach prejudices it. Memorize the core duties:

1. Prompt notice to the insurer of how, when, and where the accident or loss happened, plus names and addresses of injured persons and witnesses.
2. Cooperate with the insurer in investigation, settlement, and defense.
3. Promptly forward copies of any notices, summonses, or legal papers received.
4. Submit, as often as reasonably required, to physical exams by doctors the insurer selects and to examinations under oath (EUO).
5. Authorize the insurer to obtain medical and other records.
6. Submit a proof of loss when required.

Additional Duties for Specific Coverages

Certain coverages add duties on top of the general list:

Trap: Under Part D, an insured who repairs the vehicle before allowing the insurer to inspect it may jeopardize the claim - the duty to permit inspection before repair is a condition. Also, the insured must mitigate (protect from further loss); the policy reimburses reasonable protective costs.

Racing, Public-Livery, and Electronic-Equipment Exclusions

Part D's exclusions remove physical-damage coverage in several recurring situations. There is no coverage for loss while the auto is used as a public or livery conveyance (ride-share for hire without the proper endorsement), for damage from racing or speed contests, or for wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires — these are maintenance items, not fortuitous losses.

The form also limits coverage for electronic equipment not permanently installed, custom furnishings in pickups and vans without an endorsement, and awnings, tapes, records, and similar media. After a loss, the duties condition requires the insured to notify the police promptly when the auto is stolen, take reasonable steps to protect the auto from further loss, permit inspection and appraisal of the damaged vehicle before repair, and cooperate in the investigation and any suit. A breach of these duties can suspend the insurer's obligation to pay, even on an otherwise covered loss.

Betterment and the Appraisal Right on Physical Damage

Physical-damage adjusting raises the betterment issue: when repairs leave the insured better off — a new battery or tires replacing worn ones — some insurers apply a betterment deduction so the insured pays the portion representing improved value, consistent with indemnity. The deductible is then subtracted after the loss amount (and any betterment) is set.

If the insured and insurer disagree on the amount of a Part D loss, the appraisal provision in many auto forms lets each select a competent appraiser, with an umpire breaking a tie, mirroring the property appraisal clause. The insured's post-loss duties — prompt notice, police report for theft, protecting the auto from further damage, and allowing pre-repair inspection — are conditions precedent, so ignoring them gives the insurer grounds to deny.